If you’re seeking a loan for a manufactured or mobile home, you may be wondering how to finance it. Though it may sound odd, manufactured homes may be classified as a form of personal property, rather than real property (or real estate). A chattel financing loan or a chattel mortgage is available for financing this unique property type. Chattel may be a foreign term to you, so here’s an introductory primer on what you need to know about chattel financing for a mobile property.
What is a Chattel Loan?
A chattel loan is a type of mortgage for a movable piece of personal property, such as a manufactured home This property is defined as a chattel. and is the collateral for the loan.
Personal vs. Real Property
A manufactured home or mobile home can be classified in two ways: real property or personal property. Personal property is defined as any form of property, or asset, besides real estate. Some examples of personal property include boats, aircrafts, mobile homes, vehicles, motorcycles, trailers, campers, and RVs.
The defining distinction between personal property and real property is that personal property’s location isn’t fixed. Personal property can be moved from one place to another. In contrast, real estate is defined as real property, as it exists in a specific location and can’t be moved.
Chattel vs. Traditional Mortgages
A chattel mortgage only includes the personal property itself, not the land where the property is located. Borrowers with a chattel mortgage typically rent the land where their personal property will be kept. A traditional mortgage includes a house and the land where the house is located. At the end of a chattel mortgage, you’ll still own the manufactured home or other personal property covered by the chattel financing. In the case of a traditional mortgage, however, you’ll not only own the home you financed but also the land it sits on.
There’s an exception to this rule, however. If you’re financing a manufactured home that’s permanently attached to a HUD-approved foundation, you can purchase it with a traditional loan. In this case, you may be able to get a government loan to keep your costs lower.
What Properties Are Eligible for Chattel Loans?
Several types of properties are eligible for financing via a chattel loan. Before applying, learn the difference between them to assist you in your search for financing.
Manufactured homes were formerly known as mobile homes, although the terms are often used interchangeably. Homes in this category are built offsite from where they’ll eventually be located. After construction, they’re transported using a chassis. They’re usually moved into a community of other manufactured homes. Manufactured homes may or may not be permanently attached to a foundation. When they are not, they are typically financed with a chattel loan (chattel mortgage). When they are attached to a permanent foundation, they are typically financed by a more traditional mortgage.
Modular homes have similarities to manufactured homes in appearance, construction, and so forth but are less “mobile” due to placement on a more permanent foundation. As they’re not usually moved after placement, they can also qualify for financing by conventional mortgages, as they could be considered fixed or real property. As in traditional housing, a modular home must adhere to all the same local building codes.
How to Apply for a Chattel Loan
CFirst of all, chattel mortgages loans aren’t as readily available as traditional mortgages, so you’ll have fewer choices of lenders. While not as plentiful as traditional mortgages, they are available from a few sources such as here at Cascade.
Our first step at Cascade is to get you a prequalification letter. Manufactured home retailers will want to know that you have been qualified by a lender before they spend time showing you all the options. The prequalification letter from Cascade will let them know you’re serious. To get a prequalification letter, our team will walk through an application with you and email you the letter.
What Are the Pros and Cons of a Chattel Mortgage?
There are numerous advantages to a chattel loan. Chattel loans usually have lower processing fees as well as lower interest rates than those associated with unsecured loans. Chattel loan interest is tax-deductible, although there are some limitations. Also, chattel loans typically have a shorter term than a traditional mortgage.
If you’re interested in learning more about chattel financing for your next purchase, reach out to the knowledgeable team at Cascade Loans. We have the experience and expertise needed to answer any questions you may have or get you set up with financing options.